New VAT Tax For Laotian And Expats Could Kill Tourism With Thailand

Laos recently introduced a VAT to be paid on any goods brought back to the country if the total value reaches US$50 and above. The 10% tax to be paid is only for Laotian citizens venturing abroad as well as expatriates based in the country. The first country to be affected is of course Thailand as many Laotians just cross the border regularly to buy goods in neighbouring provinces such as Nong Khai, Udon Thani, Mukdahan, Nakhon Phanom or Ubon Ratchathani. Many of Thai bordering cities have seen the development of large shopping centres around hypermarkets in the last decade to cater with Laotian visitors.

Laotian visitors to Thailand are among the Kingdom’s top markets. Since 2014, Lao PDR generates over one million travellers to Thailand on an annual basis, representing on average a market share of 4% of all arrivals to the kingdom. In 2016, Lao PDR will be Thailand fifth largest source market of visitors behind China PRC, Malaysia, South Korea and Japan.

The introduction of the VAT consequently will certainly translate into a slowdown in arrivals, if not a drop. Thai trade and tourism actors are aware of this potential damage and start to bundle their forces, asking the Thai government to raise the issue with their Laotian counterparts. The new Laos tax measure starts to cripple growing border trade, described the Bangkok Post last week. thailand would love to at least see the cap to be raised with a higher ceiling. The issue is due to be soon discussed during a joint trade committee meeting.

The new VAT is to be paid upon entry through border checkpoints, including international airports. The VAT levy is however not waived for travellers going less than twice a month outside the country.

talking to the Bangkok Post, Monnipa Kovitsirikul, chairwoman of the Thai Chamber of Commerce for Nong Khai, said that after Lao authorities started collecting the VAT, spending on goods by Lao visitors fell by 70-80%. “After the VAT came into force, we’ve seen fewer Lao visitors every day,” she said to the newspaper. “More importantly, most of them are only buying essential goods as they try to dodge paying tax.”

In November, the growth of Lao visitors to Thailand grew only by 6.4% while from January to October total arrivals from Laos grew by 18.5%. From January to November 2016, Laotian arrivals to Thaialnd reached 1.285 million arrivals, instead of 1.096 million for the same period of last year.